US Tariffs to Hit Exports by 6%, Threaten Millions of MSME Jobs
According to estimates by the Federation of Indian Export Organisations, about 55 per cent of exports to the US will be severely impacted by the tariffs
Chennai: The US tariffs are likely to cause around an 11 per cent drop in merchandise exports, with the overall export impact estimated at close to 6 per cent. As the tariffs will hit labour-intensive and MSME-dominated sectors the hardest, jobs are expected to be a major casualty.
According to estimates by the Federation of Indian Export Organisations, about 55 per cent of exports to the US will be severely impacted by the tariffs—equivalent to $47.5 billion out of the $86.5 billion worth of exports to the US in FY25. When measured against the $437 billion in total merchandise exports for FY25, the impact is 10.8 per cent, and against combined merchandise and services exports, it is 5.79 per cent. This will compound India’s already slowing merchandise exports.
The impact on export earnings could be more painful due to job losses, as most of the affected sectors are labour-intensive and MSME-driven.
MSMEs account for 19.64 per cent of engineering goods exports and employ about 4 million people. Of the $19 billion in engineering goods exports, steel, aluminium, and derivatives may decline by 10–15 per cent as tariffs are uniform for all countries. However, for other products, the impact could be around 50 per cent, as reciprocal tariffs will intensify competition from countries with lower tariffs.
The textile industry, India’s second-largest employer after agriculture, supports over 45 million livelihoods and is dominated by MSMEs. A significant share of this employment comes from export units. In FY25, India’s exports of textiles, made-ups, and knitted and woven garments to the US stood at about $10 billion. Industry estimates suggest these exports could drop by around $5 billion, as India competes with Bangladesh, China, Vietnam, and Cambodia. Knitted apparel will face a 63.9 per cent total tariff (13.9 per cent MFN tariff + 50 per cent additional tariff); made-ups will face 59 per cent (9 per cent MFN + 50 per cent); and woven apparel 60.3 per cent (10.3 per cent MFN + 50 per cent).
MSMEs dominate the gems and jewellery sector, which employs around 4.3 million people. The $10 billion in exports from this sector will face a 52.1 per cent duty (2.1 per cent MFN + 50 per cent additional). Jewellery, being a discretionary item, is particularly vulnerable to higher prices, especially as demand has already been weak in recent years. Exports have been declining since 2012.
India’s seafood exports are largely MSME-led and provide jobs to lakhs of workers. India exported $2 billion worth of shrimps to the US in FY25, accounting for 9.52 per cent of total US shrimp imports. These products now face a 50 per cent tariff, along with an anti-dumping duty and countervailing duty of about 10 per cent, and will face stiff competition from Canada, Ecuador, Vietnam, Chile, and Indonesia.
